Correlation Between Sims Metal and CSL

Can any of the company-specific risk be diversified away by investing in both Sims Metal and CSL at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sims Metal and CSL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sims Metal Management and CSL Limited, you can compare the effects of market volatilities on Sims Metal and CSL and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sims Metal with a short position of CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and CSL.

Diversification Opportunities for Sims Metal and CSL

-0.16

Correlation Coefficient

Sims Metal  CSL

Good diversification

The 3 months correlation between Sims and CSL is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited and Sims Metal is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sims Metal Management are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of Sims Metal i.e., Sims Metal and CSL go up and down completely randomly.

Pair Corralation between Sims Metal and CSL

Assuming the 90 days horizon Sims Metal Management is expected to under-perform the CSL. In addition to that, Sims Metal is 1.1 times more volatile than CSL Limited. It trades about -0.05 of its total potential returns per unit of risk. CSL Limited is currently generating about 0.1 per unit of volatility. If you would invest  13,680  in CSL Limited on May 18, 2025 and sell it today you would earn a total of  1,160  from holding CSL Limited or generate 8.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Sims Metal Management  vs.  CSL Limited

Sims Metal Management

Risk-Adjusted Performance

Weakest

Over the last 90 days Sims Metal Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sims Metal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CSL Limited

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in CSL Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CSL may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Sims Metal and CSL

The main advantage of trading using opposite Sims Metal and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, CSL can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CSL will offset losses from the drop in CSL's long position.

The idea behind Sims Metal Management and CSL Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.